I have found out the significant difference between these two strategies, "selling near straddles and buying more strangles further out in time" does not hedge the vega in the front month
The Perfect Option position
- Thread starter Maverick74
- Start date
I have found out the significant difference between these two strategies, "selling near straddles and buying more strangles further out in time" does not hedge the vega in the front month
Correct fengshui-123
These positions are long vega and short gamma-all limited risk but one must be cognizant of the implied volatility levels before and during the trade.
It is possible for a unilateral decline in implied volatility that will put this spread on the ropes.
Not only that: IV down less in the deferred month can make the spread suffer because vega is greater in the back. Depends on each month's (on a per strike basis) decline and the ratio of longs to shorts.
Keep in mind that the vegas dwindle, at different rates, over time.
Charles
PS: Free options seminar on Wednesday afternoons at woodiescciclub.com. Donations to Make-a-Wish-Foundation
These positions are long vega and short gamma-all limited risk but one must be cognizant of the implied volatility levels before and during the trade.
It is possible for a unilateral decline in implied volatility that will put this spread on the ropes.
Not only that: IV down less in the deferred month can make the spread suffer because vega is greater in the back. Depends on each month's (on a per strike basis) decline and the ratio of longs to shorts.
Keep in mind that the vegas dwindle, at different rates, over time.
Charles
PS: Free options seminar on Wednesday afternoons at woodiescciclub.com. Donations to Make-a-Wish-Foundation
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Yes ,some of the best books are free.
Actually would rather buy option books @ $9.99 sale;
$9.99 red tag sale better than retail.
Think it was Maverick 74 or Maverick 1 mentioned ,
expensive premium getting more exspensive;
did buy one of Schwagers books reasonable close to high,
its still valuable- might get more valuable
Depending on the stock and the market condition, your spread probably could give you a little profit. But your spread has a little weakness. Your front month butterfly spread is bias on the up side. Consider what would happen when the stock is down alittle, enough for your buttefly spread to expire worthless and your wrangle not in the profit zone. Therefore, if you want to improve your strategy, you need another butterfly spread in the front to cover a decrease in stock price. (put butterfly)
In summary, you need two butterfly spreads and a wrangle spread. It is going to cost you alot in commission. Even if you have two butterfly spread, your success rate is improved, but not guarantee.
There are better and cheap strategies to use. Trade what you see, not what you think!
Oh and one more thing, what's the cheapest commission you guys are paying for options? I heard somewhere that people are paying pennies per contract. If you could get pennies per contract, my success rate would increase greatly. There's one pwerful strategy I would use if commission is that low. Nitro is right about this part!
In summary, you need two butterfly spreads and a wrangle spread. It is going to cost you alot in commission. Even if you have two butterfly spread, your success rate is improved, but not guarantee.
There are better and cheap strategies to use. Trade what you see, not what you think!
Oh and one more thing, what's the cheapest commission you guys are paying for options? I heard somewhere that people are paying pennies per contract. If you could get pennies per contract, my success rate would increase greatly. There's one pwerful strategy I would use if commission is that low. Nitro is right about this part!
Quote from pips:
The perfect position is if you buy a short expiration put at a high and the market turns around and goes down fast.
Very easy
my perfect position this month was selling naked puts on dia when the dow was < 10k. every one expired worthless although i would have done a lot better with long calls since we had such a huge run.
I can't find this file anywhere on the Net. Does anyone know where I can find it?
I even registered at riskdoctor.com, but I can't get past the first page after logging in. (It seems to be some kind of HotComm download page for a Microsoft .exe file, which I have no use for.)
Has become a chapter in "Options Trading: The Hidden Reality" available at RiskDoctor printed in color hardback or PDF.
there is another site with a similar risk doctor name so make sure you findthe right one. Use google and use risk doctor and Cottle to get their faster.
P.S> Happy New Year C!
P.S> Happy New Year C!
This is from your website when you click on "Archives":
I clicked on Webinar and registered. Now I can log in, but I can't get past the HotComm page. There are no links or any way to get to the archives.